CIO innovator on creative destruction: Getting out of the comfort zone

Creative destruction is one way to define innovation, but sometimes getting out of your comfort zone is the best way to realize innovation, according to Bryan Smith, CIO at Volvo Construction Equipment North America.

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Scot Petersen at the recent Gartner CIO Leadership Forum in Scottsdale, Ariz., to discuss IT innovation and the CIO's role in innovation, as part of the SearchCIO.com CIO Innovator Profile Series.

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The theme of this Gartner conference is creative destruction. What does that mean to you? Bryan Smith: When I think of creative destruction, I think of the process that either individuals or businesses go through of purposefully making a decision to do something in a different way, even though it might be disrupting a comfortable way of doing things today.

I felt that [conference speaker Clayton Christensen, professor at Harvard Business School] was brilliant when he talked about the process of how it just seems like good business strategy to move up the value cycle and go through the process of leaving the low-margin, low-value-added to the lower folks, and [how those companies] eventually come up and leave you in a very vulnerable position. He spoke about several companies that have gone through that process. I think that creative destruction is necessary to do in companies where you get comfortable, because it becomes so easy to say, "Well, we've always done it this way."

At Volvo Construction Equipment, we started off several decades ago primarily [selling] articulated dump trucks and wheel loaders, and that was all we had. And we had purposely made a decision to go out and to purchase excavator businesses and road-machinery businesses because we decided that we needed to expand into all areas of construction equipment, or targeted areas of construction equipment -- and [that] without doing that, we would leave ourselves extremely vulnerable.

And we had a situation about 10 years ago where a major competitor, Caterpillar, deliberately went after that business, and they have done a great job of taking away a lot of market share. Had we been completely dependent upon that [business], I would not be sitting here; the company as we know it would not exist today, but [for the fact that] we chose to get out of our own comfort zones.

We've had other situations, specifically in the IT area, where we have decided on purpose to do things in a different way. For example, we just launched an online parts application that allows working in conjunction with the dealers, [and] allows dealers' customers to purchase parts directly from them. We work with a partner, [Dealer Information Systems Corp.] in Bellingham, Wash. It is creative destruction because it's changing the way [dealers are] used to doing things, and there's a resistance within the dealerships. … The resistance is more internal within dealerships because it upsets expectations on sales volumes, targets for bonuses and profitability, and what people do during their day-to-day activities.

So, it's destructive, and it forces you to think about things in a different way. But I would argue that while it might be a little uncomfortable, we have some entrenched competitors who have had this functionality for an extended period of time; and we're coming in late; but we need to do it.

So, what do you think is the CIO's role there? Smith: In my position, I am more of a business guy who understands information technology. I don't come from the strictly IT side. And I think it is my responsibility as a chief information officer to constantly pose the what-if question -- you know: "Have you thought about this?" "Have you thought about that?" -- [and] to be surveying the landscape and looking at what other companies are doing -- not necessarily from the construction equipment space, but to look at what consumer goods are doing: "What is the IT industry doing? Have you thought about this? Have you thought about that? Could we do this? Could we do that?" Or "Here are some potential solutions if we do it this way." In my position, it's my responsibility to do that.

Do you see innovation as more initiating the ideas, or enabling? Or is there some of both? Smith: I would say it's about half and half, because with the ubiquity of information out there today, frequently other executive team members have had at least tangential exposure to different areas of technology. So, it's not going to be that I'm going to propose something [and the reaction is] going to be like, "Huh, never even thought or heard of that." Because, you know, technology and innovations brought about by technology are … covered in Business Week and The Wall Street Journal, so it's not like they keep this stuff hidden away anymore. Maybe 15 years ago, nobody would have known, but people know about these innovations now.

So, sometimes I'm instigating, going, "Hey, we can do things differently." Sometimes I'm enabling, saying "okay." Now, [I say,] "You've already decided, here's what you want to do"; now, "Here, let me help you" -- maybe guide it in a little bit different direction. So, it's a bit of both. You're kind of always posing the what-if question; and many times the business knows [it wants] to do this. Okay, well, let me help you do it and [in] the most cost-effective and efficient manner … and to get as much of the business value out of it as possible.

You talked a little bit about comfort zones. How do you create a culture where everybody wants to participate in innovation, despite what the cost may be in the way they always do things? Smith: I wish I knew. Certainly I've been through different phases in my career where different individuals have come along that didn't want to be taken out of their comfort zone, and that's frequently tough to do. What we classify as IT in Volvo Construction Equipment is processes and systems -- and my official title is CIO or vice president of processes and systems-CIO. I put CIO in there because nobody really knows what a "vice president of processes and systems" does.

But as part of the process, what we do is, we really believe that everybody on the team needs to understand what other people are working on. You might have a subject matter expert in one area; but everybody in our organization, in my team, needs to understand what the goals are, and everybody needs to be aligned with that. Frequently, people [who resist change] will take themselves out of a game one way or another because it's too uncomfortable for them.

But I feel like the resistance to change, especially in Volvo Construction Equipment, has changed dramatically. We have a new CEO who came in several years ago, and he's initiated a whole bunch of different projects. And since the downturn, we've laid off approximately 25% of our global workforce, so the folks that remain are focused and they recognize that the comfortable time that we'd gone through for an extended period is not the way reality is any longer. And yes, we're a Swedish company, we care about the employees and we respect the individual; but we also have a business to run, and it is critical that you have a sense of urgency to begin to change these things and to address them.

Frequently, people who resist change will take themselves out of a game one way or another because it's too uncomfortable for them.

What technologies are out there that are really causing you to change the way you're running your organization, your IT organization? Smith: I think it's two things in general. You know we're all talking about the mobile devices and looking at how that is really something that can change the business. Also, [we're] looking at how much easier it is to integrate with business partners than it was. We have a dealer management system that we recommend to our dealers that are organizationally and financially ready. We've been recommending that product for approximately seven years. Historically, one of the reasons why OEMs recommended specific systems was because they didn't want a huge variety of other systems to integrate against. And we had [a] recommended one.

Because it's gotten so much easier to integrate, you're not as afraid of integrating with a variety of systems; and so now we've got a situation where not many dealers have been migrating their business systems in the last several years because they couldn't afford it, but they went through -- we've also gone through -- the advancing technology to where it's so much easier to integrate.

So, we have a dealer that has selected a non-recommended system [because] they felt like that was the right solution for them. They're a large dealer, nearly close to 10% of our North American business, [and] we certainly want to have [a] seamless, smooth transaction flow with them --absolutely. So, what do we need to do? We need to get on the stick and make sure the integration points are there for the high-transaction activities to get going between us and that dealer. Because it's so much easier to do than it was 10 to 15 years ago, I think that's another piece that's really been influencing us.

The SearchCIO.com CIO Innovators profile series highlights how CIOs use technology to meet both IT and business leadership objectives. To suggest a leader for a future CIO Innovator profile, email editor@searchcio.com.

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